Hi Dear
We are running a small tender business, and we have to deposit CDR (Cash Deposit Receipt) as bank Guarantee to the customer. that is our amount in the account of customer and can be released after 2 months. how could we manage this in manager.
First, what is a “tender business?” In many places, a “tender” refers to an offer or proposal that has no accounting impact at all.
Second, what are you selling that requires you to deposit a guarantee?
Third, where do you deposit the guarantee? In a segregated account of your own? With the customer? With a third party?
Fourth, what are the circumstances under which the guarantee is released, and how is it returned to you? Is this just a release on an internal account? Does the customer or third party pay you money?
Fifth, what do you have to do to obtain the release? What might happen to prevent release? And what would happen if whoever holds the guarantee goes out of business? (This last topic addresses your risk and, therefore, how you should regard the deposit.)
CDR is the bankers Cheque on the name of customer.
For example customer is Washington’s University, and we have annual
contract of amount 750,000/- so we have to furnish bank security 2% of
above value as performance guarantee. On completion of annual contract
customer give back our CDR and we submit in our bank account AND its been
released.
Let’ make sure I understand the process correctly. I assume from what you wrote that in the example you described, you would provide Washington University a banker’s cheque for 15,000. The university would hold that cheque without depositing it until contract completion, then give it back to you. You return the cheque to the bank, where it is cancelled without ever having been processed.
If that is correct, there is more than one way to handle things. Here are the steps you could take for one approach:
Add an asset account named Bank guarantees or something similar.
Under Bank Transactions, spend money in the amount of 15,000, naming the University as the Payee and posting the transaction to Bank guarantees. This does not affect any income or expense account, but transfers 15,000 from your bank account to the guarantee account.
At the end of the year, after the guarantee is released back to you, receive money in the amount of 15,000, naming the University as the Payer and posting to Bank guarantees again. This will transfer the money back into your bank account.
That procedure has the practical effect of recording the purchase and eventual sale of the guarantee. It separates the guarantee asset from your bank account. But its disadvantage is that you have no specific visibility into the guarantee while it is represented by the Bank guarantees account. That won’t be a problem if this is your only guarantee or if you don’t mind keeping a separate list of guarantees.
If you have many, though, you might do better to make Bank guarantees a control account and set up special accounts for the separate guarantees. Read these guides for more information on that approach: https://guides.manager.io/9256 https://guides.manager.io/10555
While the University is holding your check, it will show in the Pending withdrawals column of the Bank Accounts tab. And you will need to consider it during every bank reconciliation until it is returned. But if the University deposits the check, it will clear.
If you are happy with the guarantee check remaining as pending for the duration of the contract, you wouldn’t actually need to create the Bank guarantees account at all. You could just leave the check out there. Of course, this will not work if the University deposits it.